The foolish, Social Security, Tea Party, Ponzi-Scheme myth

The evidence says Governor Rick Perry of Texas started this myth in 2011, and an old friend I have known for almost sixty years swallowed what Perry said and thinks that Social Security [SS] is a Ponzi Scheme.

And nothing short of God appearing, who then tells him he’s wrong, is going to change that old friend’s opinion, because he heard it from his favorite guru, Dennis Prager, a conservative radio talk show host, and—the proof—in 2011, soon after Perry said it during a televised debate, Prager referred to Social Security as a Ponzi scheme.  – Maverick Philosopher

I think this old friend of mine is one of the fools that Abraham Lincoln talks about in his famous quote: “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”

Knowing that this old fool will probably never change his mind—unless God intervenes—I want to appeal to anyone who doesn’t have a mind like a concrete wall and  who is willing to listen to the evidence that SS is not a Ponzi Scheme.

Hear Governor Rick Perry make his claim, and hear Governor Romney disagree.

First, I turned to  “Social Security isn’t a savings plan or an investment scheme; it’s an Old-Age, Survivors, and Disability Insurance (OASDI) program intended to ensure that Americans are guaranteed a minimum monthly payment in their non-working years. As with all insurance programs, some people will eventually receive less than they paid in, and others will receive more.”

Next, I found this at Forbes: No, Governor Perry, Social Security Is Not ‘A Ponzi Scheme’

Forbes Magazine explained why Perry was wrong—“It is underfunded and badly needs to be modernized but even if Washington does nothing, young people will receive three-quarters of their promised benefits.”

Forbes continues, “Perry is, of course, pandering to the hard core conservatives for whom the Ponzi scheme line is akin to theological text. … There is no evidence that it is true, but it sounds so good it would be a shame to stop saying it.”

And, why is SS in trouble? The Gateway Pundit explains, “For most of its 75-year history, the program had paid its own way through a dedicated stream of payroll taxes, even generating huge surpluses for the past two decades. But in 2010, under the strain of a recession that caused tax revenue to plummet, the cost of benefits outstripped tax collections for the first time since the early 1980s.”

In addition, if we want to fix SS, MPR News says, “If lawmakers are serious about getting federal spending under control … relatively small tax increases and benefit reductions for future recipients could shore up Social Security for the foreseeable future.”

If you run into another fool like my old friend, you now know how the myth started and the facts that prove the myth wrong. But don’t expect a fool to change his mind regardless of the evidence.

By the way, SS was in trouble in the early 1980s, and guess who fixed it back then? President Reagan. It seems that nothing works perfect forever and little fixes are occasionally necessary just like a car will eventually need a tune up.


Lloyd Lofthouse is a former U.S. Marine and Vietnam Veteran,
who taught in the public schools for thirty years (1975 – 2005).

His third book is Crazy is Normal, a classroom exposé, a memoir. “Lofthouse presents us with grungy classrooms, kids who don’t want to be in school, and the consequences of growing up in a hardscrabble world. While some parents support his efforts, many sabotage them—and isolated administrators make the work of Lofthouse and his peers even more difficult.” – Bruce Reeves

IBPA Frankfurt International Bookfair

Lofthouse’s first novel was the award winning historical fiction My Splendid Concubine [3rd edition]. His second novel was the award winning thriller Running with the Enemy. His short story A Night at the “Well of Purity” was named a finalist of the 2007 Chicago Literary Awards. His wife is Anchee Min, the international, best-selling, award winning author of Red Azalea, a New York Times Notable Book of the Year (1992).

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”

Social Security and Medicare’s impact on the national debt = ZERO!

I recently read a post by Chris Moody writing for Yahoo News. The focus was on Republican House Budget Committee Chairman Paul Ryan, and his goals to fix what many Americans think of as broken entitlement programs: Social Security and Medicare—as if those two programs are the problem that has caused today’s U.S. National debt of almost $17 Trillion.

First, I want to examine the word “entitlement”, because today many see the word to mean the same as welfare but entitlement means “the fact of having a right to get something”.

Now, how did most Social Security recipients earn this entitlement? For me, I had to work for more than ten years and pay taxes into Social Security to earn the right to collect it later after I was in my mid-sixties, but now I will never see one dime from Social Security. I’ll explain why at the end of this post.

If you click on the link at the end of this paragraph, you will discover: “When you work and pay Social Security taxes, you earn up to a maximum of four ‘credits’ for each year. The way you earn a credit has changed over the years. … During your lifetime, you probably will earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount.” Source: Official Social Security Website

Did you see the words work, pay and earn—that explains how these two programs work?

Remember this: People who are entitled to and who collect Social Security have not contributed to the National Debt for this entitlement—not one penny. Why? Because the Social Security law clearly says that the program cannot be funded by any other source than the Social Security tax that was first collected in 1935.

In fact, for 2012, Social Security collected $840,190,000,000 [billions] and only paid out $785,781,000,000 in entitlements to Americans who earned those payments. And the Social Security trust fund had $2,732,224,000,000 [trillions] in assets at the end of that year—of course the real problem is that those assets are in the form of IOU’s from the U.S. Congress who spent all that money over the last seventy-seven years for other budget items.

Where did your Social Security’s funds go?

Do you know that the U.S. Congress can borrow and spend the money collected to fund Social Security from the Social Security tax but the same law says Social Security cannot be funded by any other tax?

Therefore, the United States Congress—our elected government—owes the American people Trillions of dollars. To escape the hole the U.S. Congress has dug for itself since 1935—a very deep hole—they have to demonize the Social Security and Medicare programs and manipulate public opinion to believe these programs are one of the causes of the National Debt.

Medicare, like Social Security, is funded by payroll taxes paid by most employees, employers, and people who are self-employed.… The Medicare Program is the second-largest social insurance program in the U.S., with 50.7 million beneficiaries in 2012. To learn more, I suggest you click on the following link: How is Medicare funded?

In 2012, Medicare collected $532.6 million and paid out $550 million but the deficit of $17.4 million was funded by its assets—savings account—that still had a balance of $301.2 million at the end of that year. Source:

Conclusion: If Social Security and Medicare have not contributed one penny of the almost $17 Trillion U.S. National Debt, what spending programs did Congress approve in the last seventy-seven years that are responsible? What is it that America’s elected Congress doesn’t want the American voters to know?

Here is the answer to why I can’t collect the Social Security that I worked for and earned:

I started working at age 15 and by the age of 30—more than ten years of work [this includes my years as a U.S. Marine, and I am a Vietnam veteran] and five years of college later—when I went back to school to become a public school teacher, I had earned the right to collect Social Security.

But because I was a teacher in the public schools for thirty years (1975 – 2005) and paid more than 8% of my earnings into the CalSTRS retirement system instead of Social Security for those thirty years, I was disqualified from collecting the Social Security I had earned between the ages of 15 and 30. The feds call it double dipping—something the US Congress had been doing since 1935 with the Social Security Trust Fund.


Lloyd Lofthouse is a former U.S. Marine, Vietnam Veteran and English-journalism teacher.

His latest novel is the award winning Running with the Enemy that started life as a memoir and then became a fictional suspense thriller. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”

The Evolution of a National Debt Burden – Part 7/7

Next, we should discover where the revenues comes from that helps pay the bills of the annual federal budget, America’s wars and socialist-welfare programs.

The Washington Post reported that federal government’s revenues for 2011 were $2.57 Trillion, and this money came from six sources:

  • individual taxes of $1.1 Trillion (42.8%)
  • social insurance (Payroll – Social Security and Medicare) of $934 Billion (36.3%)
  • corporate taxes of $297 Billion (11.5%)
  • customs duties of $27 Billion (1.05%)
  • excise taxes of $74 Billion (2.87%)
  • estate and gift taxes of $25 Billion (0.97%)
  • other of $87 Billion (3.38%)

How much did the federal government spend in 2011? $3.8 Trillion.

  • Defense spending was $895 Billion or 23.55% (this money is available for use at the discretion of the user. Discretion means: the freedom to decide what should be done in a particular situation).
  • Other discretionary spending was $510 Billion or 13.4%

Mandatory spending programs (required by law or rules; compulsory which means there is no choice. The only way to change this spending is through the Congress or if the Supreme Court rules it is unconstitutional) were:

  • Social Security (SS) of $730 Billion or 19.2% – passed into law by Congress in 1935

The 1935 Social Security Act created primarily a pay-as-you-go system, meaning that payments to current retirees come from current payments into the system. The trust fund represents a legal obligation of the federal government to program beneficiaries. The government has borrowed nearly $2.7 trillion as of 2011 from the trust fund and used the money for other purposes such as paying for wars and funding other social welfare programs that do not have a tax source to fund them.

The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033 … Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

  • Medicare of $491 Billion or 12.9% – passed into law by Congress in 1965

Medicare is a national social insurance program, administered by the U.S. federal government since 1965, that guarantees access to health insurance for Americans ages 65 and older and younger people with disabilities as well as people with end stage renal disease. The trust fund is considered insolvent when available revenue plus any existing balances will not cover 100 percent of annual projected costs. The projected date of HI Trust Fund exhaustion is 2024, the same date projected in last year’s report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs. The Trustees project that the share of HI expenditures that can be financed with HI dedicated revenues will decline slowly to 67 percent in 2045, and then rise slowly until it reaches 69 percent in 2086. The HI 75-year actuarial imbalance amounts to 36 percent of tax receipts or 26 percent of program cost.

  • Medicaid of $297 Billion or 7.8% – became law in 1965

Unlike Medicare, which is solely a federal program, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive matching funds and grants.

Medicaid funding has become a major budgetary issue for many states over the last few years, with states, on average, spending 16.8% of state general funds on the program. If the federal match expenditure is also counted, the program, on average, takes up 22% of each state’s budget.

Medicaid does not pay benefits to individuals directly; Medicaid sends benefit payments to health care providers.

  • Troubled Asset Relief (TARP) of $11 Billion or 0.29% – became law in 2008
  • jobs initiatives or JOBS Act of $25 billion or 0.65% – passed in Congress April 5, 2012
  • other of $612 Billion or 16.1%
  • Interest on the debt of $251 Billion or 6.6%
  • potential disaster costs of $3 Billion or 0.079% – FEMA was formed June 19, 1978
    The Department of Housing and Urban Development in 1973-1979
    FEMA became an independent agency 1979-2003
    In 2003, FEMA was placed under the Department of Homeland Security

Conclusion: Because the national debt for 191 years until 1981, when Ronald Reagan was elected president, came from the cost of fighting wars, then some or all of the current national debt must also come from wars that the US fought after 1981. In addition, some of the national debt may come from some social welfare programs but cannot come from Social Security or Medicare because these two programs are funded by a specific tax and trust fund.

The US Defense Budget 1947 – 2012 was $15.6 Trillion and the Defense Budget comes out of the general fund. In addition, another $850 Billion went to foreign military and economic aid—a form of foreign welfare that is never paid back by the countries that receive this aid.

In contrast, total spending on social welfare programs 1947 – 2012 was $6.2 Trillion, but $1.343 Trillion of that was unemployment benefits (established in 1932) funded by a federal-state program jointly financed through federal and state employer payroll taxes. Generally, employers must pay both state and federal unemployment taxes. The IRS collects this annual federal employer tax used to fund state workforce agencies. This means actual welfare programs cost $4.857 Trillion over sixty-four years.

Then defense spending cost 321% more than social welfare programs over the same period of time.

You decide the answer to the last questions:

Where does most if not all of the National Debt come from and why do we keep hearing from the Tea Party and the GOP that social welfare programs are the blame?

How much did President Obama add to the federal budget – the actual amount he is responsible for?

Note: The Inflation calculator used for this series of posts may be found at Dave, and the primary source for government spending was US Government

Return to The Evolution of a National Burden – Part 6 or start with Part 1

Also discover Each President’s share of the US National Debt and learn more from the National Debt Info-Graphic by President 1945 – 2012


Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”